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Limited Liability Company

The "Sociedad de Responsabilidad Limitada" (S.R.L. or S.L.) is presented as a company of a capitalist nature in which the stock capital, comprised by the contributions made by those participating in it, is divided into indivisible and cumulative participation units, which do not have the nature of securities and cannot be represented by means of certificates or book entries, nor can they be called shares.

The stock capital cannot be less than 3,000 € and must be fully paid up from the very start. The participation unit holders are not personally liable for the company’s debts, and their liability is limited to the capital contributed.

The transfer of participation units cannot be made freely to anyone outside of the company, for which reason, the company’s consent must be obtained in order to do so. The necessary consent is expressed through a resolution by the General Meeting. Any clauses included in the articles of association that would render the voluntary transfer of the participation units by inter vivos acts practically free are considered null and void. There is no minimum number of participation unit holders in order to form a limited liability company, and such a company can be incorporated with a single participation unit holder (a sole participation unit holder limited liability company 'Sociedad Unipersonal de Responsabilidad Limitada'). Neither is there a maximum number of participation unit holders established for an S.R.L.

The incorporation of the company takes place through a public deed, which must be registered with the Mercantile Registry. As from the time of registration, the company acquires a legal personality.

The following details are to be included in the deed of incorporation:

  • The identity of the participation unit holder or participation unit holders.
  • The intention to incorporate a limited liability company.
  • The contributions made by each participation unit holder and the numbering of the participation units assigned in exchange.
  • The articles of association of the company.
  • The determination of the specific manner in which the management of the company is to be organised initially, if the articles of association make provision for several alternatives.
  • The identity of the person or persons who will be in charge of the management and representation of the company initially.

The deed can include any and all of the agreements and terms and conditions as the participation unit holders may deem advisable to establish, provided that such agreements are not contrary to the Law and do not contradict the principles inherent to the form of a limited liability company.

The company’s articles of association must include the following information:

  • The name of the company.
  • The corporate purpose, determining the activities comprising such purpose.
  • The date for the closing of the business year.
  • The stock capital, the participation units into which the capital is divided, the face value and numbering of such units.
  • The way or ways in which the management of the company is organised, in the terms established by Law.

The limited liability companies pay tax under the Company Tax system and do not have access to the Simplified Regime or to the Equivalence Surtax under the Value Added Tax system. The rate applicable under Company Tax is 30%. There is a special tax regime within the Company Tax system for small companies, which are those companies whose net turnover does not exceed eight million euros, whereby the first 300,000 € of profit are subject to a reduced tax rate of 25%.

The legal relations of these companies are regulated by Act 2/1995, 23 March 1995 (BOE, 24 March 1995), on Limited Liability Companies.

Characteristics
  • Its own legal personality.
  • The status of a trading concern regardless of the nature of its purpose.
  • Incorporation formalised through a public deed and its subsequent registration in the Mercantile Registry.
  • It is mandatory for the name of the company to include the expression “Sociedad de Responsabilidad Limitada" (Limited Liability Company), "Sociedad Limitada" (Limited Company) or the abbreviations "S.R.L" or "S.L".
  • The company must establish its registered office at the address where it carries out its actual administration and management, or at the location of its principle establishment or operation.
  • Stock capital comprised by the contributions of the participation unit holders, which may take the form of cash, properties or rights. In the event of non-monetary contributions, the participation unit holders will be jointly and severally liable with respect to the company and third parties for the reality of such contributions and for the value attributed to them in the deed. In no case may an individual’s work or the provision of services serve as a contribution.
  • The stock capital may not be less than 3,000 euros. It must be fully subscribed and paid up at the time of incorporation.
  • Accessory contributions separate from the contributions of capital, can be established in the articles of association on a compulsory basis for all or only some of the participation unit holders, indicating the specific content of such contributions and whether they are to be made gratuitously or for remuneration. If the accessory contributions are remunerated, the articles of association must determine the remuneration to be received by the participation unit holders concerned.
  • The transfer of the participation units must be formalised in a public instrument.
  • A participation unit holder who intends to transfer his participation unit or units must advise the directors in writing, specifying the number and characteristics of the participation units he intends to transfer, the identity of the purchaser, the price and other terms and conditions of the transfer. The actual transfer will be subject to the company’s consent, which will be expressed through a resolution by the General Meeting. The company may only refuse its consent, if it advises the transferor through a Notary Public of the identity of one or more participation unit holders or third parties willing to acquire the total number of the participation units to be transferred.
  • Any clauses included in the articles of association that would render the voluntary transfer of the participation units by inter vivos acts practically free are null and void.
  • Companies incorporated with a single participation unit holder must expressly indicate their sole participation unit holder status (unipersonal) on all of their documents, correspondence, order forms and invoices, as well as in all notices that must be published as a legal requirement or in accordance with their articles of association.
  • Limited liability companies may not agree upon or back the issuance of debentures or other negotiable securities grouped in issues.
  • Corporate bodies:
    • General meeting
    • Directors.
  • The management of the company can be entrusted to a sole director, to several directors who act jointly and severally or as a body, or to a Board of Directors.
  • Unless otherwise stipulated in the articles of association, a person does not have to be a participation unit holder in order to be appointed as a director.
  • The directors may not engage in the same kind of trade as that comprising the corporate purpose of the company, either on their own account or as a salaried employee of another, unless they are expressly authorised to do so in a resolution by the General Meeting.
  • The directors will hold their offices for the term stipulated in the articles of association and may be removed from office at any time as a result of a resolution by the General Meeting.
  • The company’s directors must prepare the annual accounts, which will include the balance sheet, the profit and loss account and the annual report, within a period of three months following the closing date of the business year.
  • The annual accounts and the management report must be reviewed by auditors, with the exception of companies entitled to submit an abridged balance sheet.
  • An abridged balance sheet may be submitted by companies in which, during two consecutive business years, as of the end of each year, at least two of the following circumstances concur:
    • That the total of the items on the assets side does not exceed 2,850,000 €
    • That the net amount of the annual turnover is less than 5,700,000 €
    • That the average number of employees during the business year does not exceed 50.
  • An abridged profit and loss account may be prepared by companies in which, during two consecutive business years, as of the end of each year, at least two of the following circumstances concur:
    • That the total of the items on the assets side does not exceed 11,400,000 €
    • That the net amount of the annual turnover is less than 22,800,000 €.
    • The average number of employees during the business year does not exceed 250.
  • In the case of a newly established company, an abridged balance sheet and an abridged profit and loss account can be submitted, whenever two of the three conditions mentioned above are met at the time of the closing of accounts at the end of the year.
  • The annual accounts must be presented for deposit in the Mercantile Registry within a period of one month following their approval. The submission can be made on a paper or on a computerised support.

Participation unit holders rights
  • To share in the distribution of profits and in the assets resulting from the winding-up of the company.
  • Pre-emptive right for the acquisition of the participation units of participation unit holders leaving the company.
  • The right to participate in the corporate decisions and to be elected as directors.
  • The right to information in the periods established in the articles of association.
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